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Freight Market, Market Update


FREIGHT MARKET UPDATE: Q2 – MAY 2024

May 8, 2024 / US



Q2 2024 FREIGHT MARKET UPDATE: KEY INSIGHTS AND RECOMMENDATIONS FOR SHIPPERS AND
CARRIERS

Updated May 8, 2024

As we round out the first half of this year, the freight market continues to
remain stable and in shippers’ favor. Consumer spending has recovered from a
winter slowdown, and the manufacturing sector has expanded for the first time in
16 months—factors that illuminate a resilient economy. 

However, a market turn is still possible later this year, as spot-to-contract
rate spread normalizes and carriers rightsize their headcount. Now is the time
to build proactive, data-driven logistics strategies to ensure your team is
prepared to address future disruption. Our latest Quarterly Market Update and
Outlook Report shares data and insights from our experts around the impacts of
leading economic and supply chain trends. In Q2, these include the state of
rates and route guide performance in the U.S. truckload sector, capacity
constraints in Mexico, and new sustainability policies designed to reduce our
industry’s carbon emissions. Read on for a snapshot of what to expect and how to
prepare: 


U.S. TRUCKING: WHILE COST AND CAPACITY PRESSURES EASE, THE MARKET COULD TIGHTEN
IN H2

The truckload market is continuing its journey to supply-demand balance. After
the U.S. manufacturing sector grew for the first time in 16 months—with the ISM
Manufacturing PMI index rising to 50.3 in March—the demand for truckload
recovered following a slowdown in early 2024. 

On the supply side, for-hire trucking carriers added 4,100 jobs in March, the
highest increase since June 2022 (excluding the hiring of Yellow’s laid off
workers last September). 

The state of spot and contract rates should be of particular interest to
shippers, especially as they seek to plan and manage their budgets for the
second half of the year. Spot and contract rates fell in February, March, and
April; and contract rates, specifically, remained flat and were 14% lower
year-over-year. Historically, when contract rates fall, carriers reduce
headcount, and eventually shippers could face rising spot rates and lower First
Tender Acceptance (FTA) rates. 

Our recommendations:

 * To maintain high FTA, build strong, productive relationships at the lane
   level, as carriers are more likely to accept a tender the longer a rate has
   been in place, and benchmark your network to pinpoint underpriced or
   overpriced lanes. 
 * Improve visibility by developing a plan to integrate carriers into your
   preferred method of communication and tracking. For example, Uber Freight’s
   scheduling API empowers seamless integration between logistics technology
   platforms and carrier scheduling systems.
   


THE LATEST IN MEXICO: CARRIERS SEEK LONG-TERM COMMITMENTS AS CAPACITY TIGHTENS

After surpassing China as the lead trading partner for the U.S. last year,
Mexico remains a cornerstone of economic progress. The total trade value between
both countries reached $745.6 billion in 2023, and 81% of Mexico’s exports were
shipped to the U.S. 

There is massive potential for growth and success of cross-border transportation
programs this year, but logistics teams must have plans in place to navigate
future volatility. Mexico carriers are beginning to experience capacity
constraints as shippers increase volumes, and the country is also experiencing a
driver shortage, with 56,000 unfilled driver positions—a 9% year-over-year
increase. 

Cargo theft also continues to escalate. During January and February, the country
reported 1,381 theft incidents. Members of the Mexican Alliance of Carrier
Organizations (AMOTAC) responded by holding a national strike on the central
federal highways.

Additionally, Mexico continues to capitalize on the benefits of nearshoring.
Last quarter,  the Secretary of Economy identified 73  investment announcements,
representing $31.5 billion and 39,000 new direct employment over the next two to
four years.

Our recommendations:

 * As more manufacturing facilities are installed in Mexico due to nearshoring’s
   growth, capacity will tighten. Prioritize forming long-term commitments with
   carriers to ensure capacity during high demand periods. 
 * To address driver shortages, develop processes to improve their working
   conditions. Tools like facility ratings technology can help uncover driver
   frustrations and improvement opportunities. 
 * Prioritize fighting cargo theft with fraud prevention solutions including
   real-time shipment tracking to catch suspicious activity.
   


SUSTAINABLE LOGISTICS: NEW POLICIES SPARK CONSIDERATION FOR GREEN SOLUTIONS

The transportation industry is responsible for as much as 11% of worldwide
carbon emissions, emphasizing the need for logistics teams to build greener
supply chains. Making sustainable choices not only helps fight climate change,
but it can also save your business money and enable your transportation
operations to stay ahead of changing sustainability regulations. 

The Biden-Harris Administration in March released the National Zero-Emission
Freight Corridor Strategy, which will guide the deployment of zero-emission
medium- and heavy-duty electric vehicle (HDEV) charging, along with hydrogen
fueling infrastructure from 2024 to 2040. Phase 1 of this strategy will
establish priority hubs for HDEV charging and hydrogen refueling along U.S.
freight corridors over the next three years, based on freight volume. 

Additionally, the Securities and Exchange Commission (SEC) has introduced new
requirements for carbon footprint disclosure. Beginning in 2025, public
companies must report Scope 1 and Scope 2 GHG emissions, how they’re addressing
climate-related risks, and their climate targets and goals.

Our recommendations:

 * Connect with your logistics partner to figure out if and when electrification
   makes sense for your business, and how to adopt and deploy HDEVs in the
   future. 
 * Gain better visibility into emissions estimates with tracking technology such
   as the Uber Freight Emissions Dashboard to help identify your biggest carbon
   contributors.

These are just a few of the findings from our new report. For a comprehensive
outlook of what logistics teams can expect this quarter, including an overview
of global supply chain events, see our full Q2 Market Update and Outlook Report.

_________________________________________________________________________________________________________________________________________________________________


APRIL 2024 FREIGHT MARKET UPDATE: KEY INSIGHTS

Updated April 24, 2024

Both inflation and the labor market seem to be more resilient to the tightest
monetary policy seen in decades. Consumer prices in the US have surprised to the
upside for three months in a row. The unemployment rate fell to 3.8% in March as
the economy added 300K payroll jobs, the highest increase since January 2023
(tied with May 2023). The recent rise in inflation and employment indicate that
the Fed is likely to keep the Federal Funds Rate higher for longer. Despite
that, freight demand is back to growth mode. Retail sales rebounded in March and
manufacturing output expanded for the first time in 16 months. However, the
freight market unexpectedly added more capacity in March. For-hire trucking
carriers added 5.1K jobs, the highest increase since June 2022, except for
September 2023, when carriers rushed to hire YRC’s laid off workers. In
addition, the number of new trucking carriers authorized by FMCSA exceeded
authority revocations for the first time since March of last year, and the
second month only since October 2022.

Impacts and recommendations from the Baltimore’s Key Bridge crash – The Port of
Baltimore handled more than $80 billion in international cargo in 2023. It’s the
top port for the nation’s farm and construction equipment, and the closest East
Coast port to the Midwest. – Prior to the accident, nearly 4,900 trucks passed
over the Francis Scott Key bridge per day. – Overall, there will be minimal
impacts to container traffic. The majority of volume is being diverted to the
port of New York/New Jersey or the port of Virginia. So far, this has generally
not caused any major congestion or increase in pricing other than diversion fees
charged by carriers for specific Baltimore-designated origins or destinations.
Salvage crews have started unloading containers from the Dali, and Unified
Command announced they will re-open the main channel by the end of May. – Uber
Freight will continue to provide additional visibility in the region, and until
the confirmation of the channel opening will continue to reroute shipments to
alternate, nearby ports.

Read the detailed report here.

*All data is generated by Uber Freight internal indices using a weighted
combination of truck and driver availability for supply, and manufacturing
output, goods consumption, imports and exports for demand.

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